NAME:__________________________________

SECTION:__________________________________
ANSWER SHEET Quiz 2
I.
1.
2.
3.
4.
5.
6.
7.
8.
9.
1
0.
1
1.
1
2.
1
3.
1
4.
1
5.

THEORIES (1.5 POINTS EACH)

C
D
D
D
C
A
D
A
A
A/C
D
B
C
C
C

II.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10
.
11
.
12
.
13
.
14
.
15
.
16
.
17
.
18
.
19
.
20
.
21
.
22
.
23
.
24
.
25
.
26
.
27
.

PROBLEMS (2.5 POINTS EACH)

660 000
669 500
91 500
8 800 000
2 250 000
268 000
130 750 loss
125 600
94 000
13 700 000
1 643 000
4 000
52 000
37 500
2 175 000
27 500
2 270 000
175 133
290 000
330 000
15 000
723 000
148 910
1 320 000
129 250
340 000
243 000

28
.

1 698 992

PART I. MULTIPLE CHOICE. Choose the letter of the correct answer. (1.5 points each)
1. Accounts receivable are normally reported at the:
a. Present value of the future cash receipt
b. Current value plus accrued interest
c. Expected amount to be received
d. Current value less expected collection cost
2. The category trade receivables includes:
a. Advances to officers and employees
b. Income tax refund receivables
c. Claims against insurance companies for casualties sustained
d. Open accounts resulting from short- term extension of credit to customers
3. Why do companies provide trade discount?
a. To avoid frequent changes in catalog
b. To induce prompt payments
c. To easily alter process for different customers
d. Both a and c
4. Statement 1: Trade receivables include notes receivable and advances to officers and
employees.
Statement 2: Using the gross method of recording cash discount, sales discount are recorded
deduction from sales.
a. Statement 1 and 2 are true
b. Statement 1 and 2 are false
c. Only statement 1 is true
d. Only statement 2 is true
5. Why would a company sell receivables to another company?
a. To improve the quality of its granting process
b. To limit its legal liability
c. To accelerate access to amounts collected
d. To comply with the customers agreement

6. Which of the following is a method to generate cash from accounts receivables?

Assignment
Factoring
a.
Yes
Yes
b.
Yes
No
c.
No
Yes
d.
No
No
7. IFRS requires all of the following when classifying receivables except:
a. Indicate the receivables classified as current and non- current in the statement of the
financial position.
b. Disclose any receivables pledged as collateral
c. Disclose all significant concentrations of credit risk arising from receivables
d. All of the choices are required by IFRS when classifying receivables.
8. Non trade receivables do not include:
a. Sales to customer
b. Loans to employees
c. Income tax refund receivable
d. Advances to affiliated companies
9. Long- term notes receivable issued for non cash assets at an unrealistically low rate will be:
a. Discounted at an imputed interest rate
b. Recorded at the contract amount
c. Accounted for an installment basis
10. In deciding whether financing with receivables is a secured borrowing or a sale under IFRS,
the critical element is the extent to which:
a. The transferee has received substantially all the risks and rewards of ownership
b. The age of the receivables transferred differs from the average age of receivable
c. The transferor of the receivable surrenders control over the assets transferred
d. The transferee relies on funds from the transferor to maintain operations.
11. The transferor is considered to have surrendered substantially all the risks and rewards of the
ownership over its receivables if:
a. The transferred assets have been isolated from the transferor.
b. Each transferee has the rights to pledge
c. The transferor does not maintain effective control over the transferee to return the assets
d. All of the above must occur
12. A customer note discounted with recourse by Jamylle was dishonored at maturity date.
Jamylle would debit:
a. A loss on dishonored receivable
b. A receivable
c. Dishonored note expense
d. Interest expense
13. JCs exotic pets discounted a note receivable without recourse and the sales criteria were not
met. The discounting is recorded as:
a. A secured borrowing
b. Only note disclosure of the arrangement is required
c. A note
d. None of the above

14. Accounting for the pledging of accounts receivable as collateral for a loan requires:
a. Reporting the receivables net of the borrowed amount
b. Removal of the pledged receivables from current assets and including them with
noncurrent investment
c. Disclosure of the arrangement in notes to the financial statements
d. None of the above
15. Which of the following s true when accounts receivable are factored without recourse?
a. The transactions may be accounted for either as a secured borrowing as a sales,
depending upon the substance of the transaction.
b. The receivables are used as collateral for a promissory note issued to the factor of the
owner of the receivables.
c. The factor assumes the risk of the collectivity and absorbs any credit losses in collecting
the receivables
d. The financial cost (interest expense) should be recognized notably over the collection
period of the receivables.
PART A. PROBLEM SOLVING (2.5 points each)
The first two questions are based on the following data:
Ghore Corporation uses the net price method of accounting for cash discounts. In one of the
transactions in February 22, 2012, Ghore Corporation sold merchandise with a list price of P
1,000,000 to a client who was given a trade discount of 15% and 10%. Credit terms were 3/15,
n/30. The goods were shipped FB Destination, freight collect. Total freight charges paid by the
client amounted to P9, 300. On February 25, 2012, the client returned the damaged goods
originally billed P75, 000.
1. What is the amortized cost of this receivable on February 28, 2012?
2. Assume the fright terms is FOB Shipping point, what is the amortized cost of this
receivable on February 28, 2012?
3. On December3, 2012, the accounts receivable general ledger account of Quirino Corporation
had a balance of P 181, 000. An analysis of the accounts receivable account showed the
following:
Accounts known to be worthless (to be
written off)
Advance payment to creditors on
purchase order
Advances to affiliated companies
Customers account reporting credit
balance arising from sales return
Interest receivable on bonds
Other trade receivable, unassigned
Subscription receivables for ordinary
share capital due in 30 days
Trade accounts receivable-assigned
Trade installment receivable due 1-18
months including unearned finance

P2,500
10,000
25,000
(15,000)
10,000
50,000
55,000
15,000
22,000

charges of P2, 000

Trade receivables
currently

from

officers,

due

1,500

Trade accounts on which postdated

checks are held. No entries were made
on receipts of check.
Total

5,000

P181,000

The correct balance of Trade accounts receivable of Quirino Corporation on December

31, 2012 is
4. When examining the accounts of EDT Corporation, you ascertain that the balance relating to
both receivables and payables are included to a single controlling account called receivables
control that has a debt balance of P 4,850,000. An analysis of the composition of this account
revealed the following:

Accounts Receivables- customers

Accounts receivables from officers arising
from sale of merchandise
Debit balances- creditors
Postdated checks from customers
Subscription receivable- ordinary share
Accounts payable for merchandise
Credit balances in customers account
Cash
received
in
advances
from
customers for goods not yet shipped
Expected bad debts

Debit
P7,800,000
500,000

Credit

300,000
400,000
800,000
P4,500,000
200,000
100,000
150,000

After further analysis of the aged accounts receivable, you determined that the allowance for
doubtful accounts should be P200,000. What is the total of current net receivables?
5. The balances of selected accounts taken from January 1, 2012 Statement of Financial Position
of Def** Company were as follows:
Accounts Receivables
Allowance for Doubtful Accounts

P2,500,000
60,000

The following summary of transactions affecting accounts receivable during the year- end
December 31, 2012:
Sales on all account (2/10, 1/15, n/30)
Cash received from customers
The cash received includes the following:
Customer paying within the 10- day discount
period
Customer paying within the 15- day discount
period
Recovery of accounts written off
Customers paying beyond the discount period

P7,935,000
8,000,000
4,410,000
2,475,000
15,000
?

Accounts written off as worthless

Credit memoranda for Sales Return

55,000
30,000

The balances of Accounts Receivable on December 31, 2012 is

The next two questions are based on the following data:
On January 1, 2012, LJ Company sold a machine to Chryska Incorporated. Chryska signed to a
non- interest bearing note requiring payment of P50,000 annually for seven years. The first
payment was made on January 1, 2012. The machine was acquired LJ on October 1, 2009 at a
cost of P500,000. The policy of LJ Company is to depreciate all depreciable assets at a rate of
10% per annum. Likewise, the machine was estimated to have a recoverable amount of P50,000
at the end of its useful life. The prevailing interest for this type of note at the date of issuance
was 10%
Periods

PV of P1 at 10%

6
7

.56
.51

PV of ordinary annuity of P1
at 10%
4.36
4.87

6. LJ should record the sale on January 1, 2012 at what amount?

7. Determine the gain or loss on derecognition or sale of equipment.
8. LLD Company had the following long term receivable account balances at December 31, 2012:
Notes Receivable from Atienza Company
Notes receivable from officer

3,000,000
1,500,000

Transaction during 2012 and other information relating to LLDs long term receivables were as
follows:

The 3,000,000 notes receivable is dated October 1, 2011 bears interest at 10%.
Principal payments of P1,000,000 plus appropriate interest are due on October 1, 2012,
2013, 2014. The first principal and interest payment was made on October 1, 2012.
The P1,500,000 receivable is dated January 1, 2011, bear interest at 8% and is due on
January 1, 2014. Interest is payable annually on December 31and all interest payments
were made on their due dates.
On January 1, 2012, LLD sold one of its division to Lito Company for P1,000,000 under
an installment sale contract. Lito made a P370, 000 cash down payment on the same
date and signed a 5- year , 12% note for P630,000 balance. The equal annual
payments of principal and interest on the will be P175, 000 payable on January 1, 2013
through January 1, 2017.

What is the accrued interest receivable on December 31, 2012 arising from the
foregoing transactions?
9. On December 31, 2012, balance sheet of Quirino Company the receivables consisted of the
following:
Trade Accounts Receivable
P93,000
Allowances for Uncollectible accounts
2,000
Claim against shipper for goods lost in Transit
3,000

December 1, 2012
Selling price of unsold goods sent by Quirino on
consignment at 30% of cost. The related inventory
was excluded in Quirinos ending inventory.
Security deposit on the lease of a warehouse used
for storing some inventories
Total

26,000

30,000
P150,000

How much should be reported as Trade and other receivables in Quirinos December
31, 2012 balance?
10. Quirino Company had the following information related to its accounts receivable for the year
2012:
Accounts Receivable, January 1
Credit Sales
Collection from customers, excluding the
recovery accounts written off
Accounts written off as worthless
Sales Return
Recovery of accounts written off
Estimated future sales return on
December 31
Estimated uncollectible on December 31,
per aging

P12,000,000
20,000,000
17,000,000
300,000
1,000,000
100,000
400,000
1,000,000

Quirino should report the December 31, 2012 accounts receivable before allowance
for sales returns and uncollectible accounts at
Questions no. 11 and 12 are based on the following data:
On January 1, 2012, Greenland Incorporated had Accounts receivable and Allowance for bad
debts of P160,000 and 12,000 respectively. Sales (all on credit) during 2012 amounted to
P1,800,000 . Accounts of P7,000 were also written off during the year. An analysis of Greenland
accounts receivable at December 31, 2012 revealed the following:
Age
0-60 days
61-120 days
Over 120 days

Amount
Estimated uncollectible
P120,000
1%
90,000
2%
100,000
6%
P310,000
There are no other transactions affecting accounts receivable.
11. How much was collected from customers during 2012?
12. Determine Greenlands bad debt expense for 2012.
13. Lupisan Company uses the allowance method of accounting bad debt expense. The following
summary schedule was prepared from an aging of accounts receivable outstanding on
December 31 of the current year.
No. of days outstanding
0-30 days
31-60 days

Amount
P500,000
200,000

Probability of collection
98%
90%

Over 60 days

100,000
P800,000

80%

The following additional information is available for the current year:

Net Credit Sales for the year
P4,000,000
Allowance for Doubtful Accounts
Balance, January 1
45,000 (cr.)
Balance before the adjustment,
2,000 (dr.)
December 31
If Lupisan Company bases its estimates for bad debts on the aging of accounts receivable,
doubtful account expense for the year ending December 31 is
Questions nos. 14 to 16 are based on the following data:
In the examination of the books of Mahinder Company for the year 2012, you concluded that the
allowance for accounts should be adjusted to equal the estimated amount required based on
aging of the accounts as of December 31. During the examination, you were able to gather the
following data:
Allowance for doubtful accounts, January 1, 2012
Provision for doubtful accounts during 2012 (3% of
P5,000,000 sales)
Bad debts written off 2012
Recovery of bad debts written off during 2012
Estimated doubtful accounts per aging of accounts on
December 31, 2012
Accounts receivable, December 31 2012

P300,000
150,000
187,500
50,000
200,000
2,375,000

Based on result of your examination, determine the following:

14. Doubtful account expense for 2012
15. Net realizable value of Accounts receivable as of December 31, 2012.
16. Assuming there was no aging of accounts and the company used 8% of accounts receivable
method, determine the correct doubtful account expense for 2012.
17. The January 1, 2012 trial balance of ABC Company shows:
Accounts Receivable
P2,000,000
Allowance for doubtful account
100,000
Additional Information for 2012:
a. Cash sales of the company amount to P800,000 and represents 10% gross sales.
b. Ninety percent of the credit sales customers do not take advantage of the 5/10, n/30
terms.
c. Customers who did not take advantage of the discount paid P5,940,000
d. It is expected that cash discounts of P10,000 will be taken on accounts receivable
outstanding at December 31, 2012
e. Sales return in 2012 amounted P80,000. All returns were from charge sales.
f. During 2012 accounts totaling P60,000 were written off as uncollectible. Recoveries during
the year amounted to P10,000. The amount is not included in the foregoing collections.

g. The allowance for doubtful account is adjusted so that it represents a certain percentage
(same percentage with the preceding year) of the outstanding accounts receivable at year
end.
On December 31, 2012, the net realizable value of accounts receivable is
18. On December 31, 2012, Buguey Company finished consultation services and accepted in
exchanged a promissory note with a face value of P200,000, due on December 31, 2015 and a
starring rate of 5% with interest receivable at the end of each year. The fair value of the services
is not readily determinable and the rate is not readily marketable. Under the circumstances, the
note is considered to have an appropriate imputed rate of interest of 10%. The following interest
factors are provided:
Interest Rate
Table factors for Three periods
Future value of 1
Present value of 1
Future of ordinary annuity f 1
Present
value
of
ordinary
annuity of 1

5%
1.15763
.86384
3.15250
2.72325

10%
1.33100
.75132
3.31000
2.48685

What is the present value of the note on December 31, 2012?

19. Sta. Ana Corporation has P3,000,000 note receivable from sale of plant bearing interest at
12% per annum. The note is dated June 1, 2011. The note is payable in three annual installment
of P1,000,000 plus interest on the unpaid balance on June 1. The initial principal and interest
payment was made on June 1, 2012. What is the interest income for 2012?
The next two questions are based on the following data:
On January 1, 2012, Sta. Ana Corporation sold equipment costing P380,000 with accumulated
depreciation of P160,000 at the date of the sale, a P400,000 non-interest bearing note, due
January 1, 2015. There was no established exchange price for the equipment and has no ready
market. The prevailing interest of the note for this type at January 1, 2012 was 10%. The present
value of 1 at 10% for three periods is 0.75.
20. What is the notes carrying value at December 31, 2012?
21. Assuming that the equipment was sold and the note described above was received
on July 1, 2012, all other data being the same, what is the interest income for the year
ended December 31, 2012?
Use the following data for the next two questions:
On November 30, 2012, accounts receivable in the amount of P900,000 were assigned to FTC
Financing by Cordon Corporation as security for loan of P750,000. FTC charged a 3% commission
on the accounts; the interest rate is 12%. During December 2012, Cordon collected P350,000 on
assigned accounts after deducting P560 of discounts. Cordon wrote off a P530 assigned
accounts. On December, Cordon remitted to FTC the amount collected plus one moth interest on
the note.

22. How much was the proceeds from assigned accounts receivable?
23. How much was the Cordons equity in the assigned accounts receivable as of
December 31, 2012?
24. On October31, 2012, Mabini Corporation engaged in the following transactions:
Obtained P500,000, 6- month loan from CitiBank, discounted at 12%. Mabini pledged
P600,000 of accounts receivable as security for the loan.
Factored P1,000,000 of accounts receivable without recourse on a notification basis with
BDO. BDO charged a factoring fee of 5% of the amount of receivables factored and
withheld 10% of the receivables factored.
What was the total cash received from financing of receivables?
25. On July 1, 2011, Olive Corp. sold an equipment to Popeye Co. for P250,000. Olive accepted a
10% note receivable for the entire sales price. This note is payable to two equal installments if
P125,000 plus accrued interest on December 31, 2011 and December 31, 2012. On July 1, 2012,
Olive discounted the note at a bank at an interest of 12%. How much was the proceeds of
Olive from the discounted note?
26. On December 31, 2012, Teodoro Corporation needed cash for its working capital
expenditures. Teodoro sold P2,000,000 on a non recourse basis accounts receivable to a factor of
80% of the face value.Teodoro maintains acclowance for doubtful accounts of P100,000 on the
accounts receivable sold. The bank (factor) withheld 10% of the purchase price as protection
against future returns of merchandise. In addition, the factor charged a service fee of 2% of the
accounts receivable. Returns against the factor receivable upon final settlement totaled P30,000.
How much loss from factoring should Teodoro recognize as a result of the above
transaction?
27. On December 31, 2012, BDO bank has a 5- year loan receivable with a face value of
P5,000,000 dated January 1, 2011 from MVP Corporation that is due on December 31, 2015.
Interest on note is payable at 10% every December 31. The borrower paid the interest that is
due on December 31, 2011 but informed BDO that interest accrued in 2012 and 2013 ,2013 and
2014 ((P500,000 each year) will be paid on December 31, 2015, the maturity date of the loan,
because of financial difficulty. The PV of 1 at 10% for three periods is .751. What is the
impairment loss to be recognized on December 31, 2012?
28. On December 31, 2012, the AIG Finance Company had a P5,000,000 note receivable from
Davao Company. The note bears 10% interest rate. The books reported accrued interest of
P500,000 on the date. Because of financial distress suffered by Davao, AIG agreed to the
restructuring and modification of the terms of the loan to Davao as follow:
Reduction of principal to P4,000,000
Reduction of interest to 8% annually beginning December 31, 2013
Accrued interest on December 31, 2012 is condoned
Principal payment was reset to December 31, 2015
How much impairment loss should AIG record on December 31, 2012 as the result of
restructuring?